Magazine Article | November 1, 2004

Manage The Costs Of Credit Card Payment Acceptance

Allowing customers to pay with plastic is no longer an option; it's a requirement in the modern world.

Integrated Solutions For Retailers, November 2004

Written by: Scott Cruickshank, Paymentech

Whether your business is a single location or a large, multichannel operation, it's become a requirement for your company to accept credit and debit cards. Along with that requirement comes the cost associated with each transaction and the fees owed to the card associations (i.e. MasterCard and Visa) and the payment processor carrying the transaction. Depending on your business type, annual sales volume, and a number of other factors, those fees can vary. But there are some ways to control the costs of credit and debit payment acceptance.

The Basics Of Controlling Payment Acceptance Costs Every transaction processed for your business is categorized by card associations. To qualify for the lowest rate, the transaction itself must meet certain card association guidelines. Here are some good rules of thumb to make sure you get the lowest possible rate:

always swipe the card, if possible

when keying a transaction, verify the cardholder's address

settle your batch every day

reconcile every day to make sure all your transactions were transmitted to the host and that you are in balance

reconcile again when you get your statement; compare the amount you sold to the amount that was funded

if you offer prepaid cards and/or gift cards, reconcile these reports as well.

Here are some other tips to help you run an efficient means of card payment processing:

Stay on top of your business. If you are out of balance, often the problem can be traced to easily rectifiable issues - your employees need a training session on using the hardware, batching out, etc., or your software needs to be adjusted slightly. By staying abreast of your unique business patterns, from how transactions are entered to your average ticket amount to the times of day when your sales spike, you will know when something is amiss.

Employ reporting tools. Internet-based reporting tools can also help you avoid costly transaction fees by tracking data that affects your bottom line, including unusually large transaction amounts, multiple consecutive card number uses (sometimes a sign of fraud), and chargebacks about to expire.

Avoid outsourcing to numerous vendors. Consider all the methods of payment acceptance your business requires. What about gift cards? Or corporate purchasing cards? Or wireless terminals? Will you add an e-commerce site? The simple truth is that multiple vendors often translate into multiple pieces of hardware, software programs, and bills.

To dial or not to dial? New products make it possible even for merchants with low sales volumes to have the kind of connectivity that is fast making dial-up a less attractive choice. Even for a relatively small merchant, Internet connectivity via a digital subscriber line (DSL) is quite practical, and can actually save money by eliminating phone lines.

How old is your terminal? If you will be choosing a new POS system, take a close look at what it can do today and what its capabilities will be tomorrow. Can it grow with your business? Can you add gift card processing? If the POS system can't grow with your business, find one that will.

Look closely at your statements. Do you understand your statement? Do you understand the different fee structures? Knowing what is on your statement can make you aware of problems or inconsistencies that are costing you money. If you don't understand, ask your processor to explain it.

Examine your payment options. Fees vary according to the type of payment you are accepting. For example, PIN-based debit is a more secure transaction and is less costly than signature debit or credit transactions. Gift cards, likewise, do not carry the interchange costs of credit cards and can be a tremendous revenue enhancer.

Finally, when selecting a processor, ask about value-adds mentioned here that will help you in the long run. The secret is in finding one that understands your business and that will partner with you to help manage the costs of payment acceptance.